For on-track revenue and “import revenue,” that is revenue we generate for racing held elsewhere that our patrons wager on, we are entitled to retain a commission for providing a wagering service to our customers. For these arrangements, we are the standard,principal because we believecontrol the most significant impact relateswagering service; therefore, any charges, including simulcast fees, we incur for delivering the wagering service are presented as operating expenses.

For “export revenue,” when the wagering occurs outside our premises, our customer is the third party wagering site such as a racetrack, Off Track Betting (“OTB”), or advance deposit wagering (“ADW”) provider. Therefore, the revenue we recognize for export revenue is the simulcast host fee we earn for exporting our racing signal to the presentation of our statement of cash flows where we will be required to reconcile to total cash, cash equivalents, and restricted cash. Currently, our statement of cash flows reconciles to total cash and cash equivalents.third party wagering site.

In August 2016,For the FASB issued ASU No. 2016-15, Statementthree months ended March 31, 2021, the Company recorded as other revenue $515,000 of Cash Flows: ClassificationCOVID-19 relief grants, including a lump sum grant of Certain Cash Receipts$500,000 from the Convention Center Relief Grant Program, which is overseen by the Minnesota Department of Employment and Cash Payments. The new guidance is intended to reduce diversity in practice in how certain transactions are classifiedEconomic Development. There were 0 grants received in the statement of cash flows. The guidance will become effective in 2018. We are assessing the impact of the new accounting guidance and currently cannot estimate the financial statement impact of adoption.three months ended March 31, 2022.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires companies to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use assets. ASU 2016-02 is effective in our first quarter of fiscal 2019 on a modified retrospective basis and earlier adoption is permitted. We are currently evaluating the impact of our pending adoption of ASU 2016-02 on our Condensed Consolidated Financial Statements.

2.    STOCK-BASED COMPENSATION

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers,which provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The revised guidance will become effective in 2018 and will be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. During 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net); and ASU No. 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients; which clarified the guidance on certain items such as reporting revenue gross versus net and presentation of sales tax, among other things.We are assessing the impact of the new accounting guidance and currently cannot estimate the financial statement impact of adoption.

Long Term Incentive Plan and Award of Deferred Stock

The Long Term Incentive Plan (the “LTI Plan”) authorizes the grant of Long Term Incentive Awards that provide an opportunity to Named Executive Officers (“NEOs”) and other Senior Executives to receive a payment in cash or shares of the Company’s common stock to the extent of achievement at the end of a period greater than one year (the “Performance Period”) as compared to Performance Goals established at the beginning of the Performance Period. Currently, there are 0 awards outstanding as of March 31, 2022. Beginning in 2020, and as a result of the COVID-19 Pandemic, the Company temporarily suspended the granting of performance awards under its LTI Plan, and instead granted deferred stock awards designed to retain NEOs and other Senior Executives in lieu of LTI Plan awards for 2020,2021 and 2022.

Board of Directors Stock Option, Deferred Stock Awards, and Restricted Stock Grants

The Company’s Stock Plan currently authorizes annual grants of restricted stock, deferred stock, and stock options, or any combination of the three, to non-employee members of the Board of Directors at the time of the Company’s annual shareholdersshareholders’ meeting as determined by the Board prior to each such meeting. Deferred stock awards represent the right to receive shares of the Company's common stock upon vesting. Options granted under the Plan generally expire 10 years after the grant date. Restricted stock and deferred stock grants to non-employee directors generally vest 100% one year after the date of the annual meeting at which they were granted, are subject to restrictions on resale for an additional year, and are subject to forfeiture if a board member terminates his or her board service prior to the shares vesting. The Board of Directors’ unvested restricteddeferred stock awards outstanding as of September 30, 2017 was 11,264March 31, 2022 to our non-employee directors consisted of 10,710 shares with a weighted average fair value per share of $10.65.$14.00. There were no0 unvested restricted stock or stock options outstanding at September 30, 2017 or DecemberMarch 31, 2016.2022.

Employee Deferred Stock Awards

PriorThe Company's Stock Plan permits its Compensation Committee to January 1, 2016 the Company’s Board awarded deferred compensation to executive officers and key employees that were not performance-based, in the form of Deferred Stockgrant stock-based awards, under the Company’s Stock Plan. Suchincluding deferred stock awards, are subject to forfeiture if an employee terminates employment priorkey employees and non-employee directors. The Company has made deferred stock grants that vest over one to four years. 

During the vesting. Generally, three months ended March 31, 2022, the Company granted employees deferred stock awards vest ratably over a four-year period and compensation costs are recognized over the vesting period. Compensation costs are recorded in “Salaries and benefits” on the Condensed Consolidated Statementstotaling 18,600 shares of Operations. As of September 30, 2017, 4,500 shares were not vestedcommon stock, with a weighted averagevesting term of approximately four years and a fair value of $10.46$21.62 per share. During the three months ended March 31, 2021, the Company granted employees deferred stock awards totaling 27,900 shares of common stock, with a vesting term of approximately three years and a fair value of $13.33 per share

Employee deferred stock transactions during the three months ended March 31, 2022 are summarized as follows: 

Stock-based compensation expense related to the LTI Plan, deferred stock awards, and restricted stock awards areis included on theCondensed Consolidated Statements of Operations and totaled $264,000approximately $105,000 and $179,000$103,000 for the ninethree months ended September 30, 2017 March 31, 2022 and 2016, respectively.

Employee Stock Option Grants

The Company has granted incentive2021. At March 31, 2022, there was approximately $637,000 of total unrecognized stock-based compensation expense related to unvested employee and board of director deferred stock optionsawards that is expected to employees pursuant to the Company’s Stock Plan with an exercise price equal to the market price on the date of grant. The options vestbe recognized over a 42-month period and expire in 10of approximately 4.0 years.

3.    NET INCOME PER SHARE COMPUTATIONS

A summary of stock option activity as of September 30, 2017 and changes during the nine months ended is presented below: 

The following is a reconciliation of the numerator and denominator of the earnings per common share computations for the three and nine months ended September 30, 2017 March 31, 2022 and 2016:2021:

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Options to purchase 30,000 shares of common stock at an average price of $12.33 per share were outstanding but not included in the computation of diluted net income per share for the three and nine months ended September 30, 2017 because the exercise price of the options exceeded the market price of the Company’s common stock at September 30, 2017.

Options to purchase 45,000 shares of common stock at an average price of $12.80 per share were outstanding but not included in the computation of diluted net income per share for the three and nine months ended September 30, 2016 because the exercise price of the options exceeded the market price of the Company’s common stock at September 30, 2016.

In May 2016, the Company sold approximately 24 acres of land adjacent to the Racetrack for a total consideration of approximately $4.3 million. Promissory notes receivable consist of two promissory notes totaling $3,191,000 bearing interest at 1.43%. On May 31, 2017, the Company signed an amendment extending the maturity date of the notes to May 2020. Payments totaling $1,094,000 are due annually until the notes mature. The promissory notes are secured by the mortgage on approximately 24 acres and management believes no allowance for doubtful accounts is necessary.

4.    GENERAL CREDIT AGREEMENT

The Company has a general credit and security agreement with Bremer Bank,a financial institution, which provides a revolving credit line up to $10,000,000 and allows for letters of credit in the aggregate amount of up to $6,000,000. This agreement was amended on September 30, 2017$2,000,000 to extendbe issued under the maturity date to September 30, 2018.credit agreement. The line of credit is collateralized by all receivables, inventory, equipment, and general intangibles of the Company. The Company had no borrowings underline of credit also includes collateral in the form of a Mortgage, Security Agreement, Fixture Financing Statement and Assignment of Leases and Rents. The maturity date of the revolving line of credit is January 31, 2024. As of March 31, 2022, the outstanding balance on the line during the nine months ended September 30, 2017.of credit was $0.

5.    OPERATING SEGMENTS

The Company has threefour reportable operating segments: horse racing, Card Casino, and food and beverage.beverage, and development. The horse racing segment primarily represents simulcast and live horse racing operations. The Card Casino segment represents operations of Canterbury Park’s Card Casino, and theCasino. The food and beverage segment represents food and beverage operations provided during simulcast and live racing, in the Card Casino, and during special and other catering and eventsevents. The development segment represents our real estate development operations. The Company’s reportable operating segments are strategic business units that offer different products and services. They are managed separately because the segments differ in the nature of the products and services provided as well as process to produce those products and services. The Minnesota Racing Commission regulates the horse racing and Card Casino segments.

Depreciation, interest, and income taxes are allocated to the segments, but no allocation is made to the food and beverage segment for shared facilities. However, the food and beverage segment pays approximately 25% of gross revenues earned on live racing and special event days to the horse racing segment for use of the facilities. Starting in 2020, the food and beverage segment has not paid a commission to the horse racing segment subsequent to the Company's first temporary shutdown of operations starting March 16, 2020. 

The following tables provide information aboutrepresent a disaggregation of revenues from contracts with customers along with the Company’s operating segments (in 000’s)000’s):

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The following are reconciliations of reportable segment revenues, income before income taxes, and assets, to the Company’s consolidated totals (in 000’s)000’s):

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In accordance with an Earn Out Promissory Note given to the prior owner of the Racetrack as part of the consideration paid by the Company to acquire the Racetrack in 1994, if (i) off-track betting becomes legally permissible in the State of Minnesota and (ii) the Company begins to conduct off-track betting with respect to or in connection with its operations, the Company will be required to pay to the IMR Fund, L.P. the greater of $700,000 per operating year, as defined, or 20% of the net pretax profit, as defined for each of five operating years. At this time, management believes that the likelihood that these two conditions will be met and that the Company will be required to pay these amounts is remote. At the date (if any) that these two conditions are met, the five minimum payments will be discounted back to their present value and the sum of those discounted payments will be capitalized as part of the purchase price in accordance with GAAP. The purchase price will be further increased if payments become due under the “20% of Net Pretax Profit” calculation. The first payment is to be made 90 days after the end of the third operating year in which off-track betting is conducted by the Company. Remaining payments would be made within 90 days of the end of each of the next four operating years. 

The Company entered into a Cooperative Marketing Agreement (the “CMA”) with the Shakopee Mdewakanton Sioux Community (“SMSC”), which became effective June March 4,2012, and was amended in the first quarter of each of January 2015,2016,2017,2018, and 2017,in June 2020 (as described below in Note 7) and will expire on December 31,2022. The CMA contains certain covenants which,that, if breached, would trigger an obligation to repay a specified amount related to such covenant. At this time, management believes it unlikely that the likelihood that theany breach of a covenant will occur, and that therefore the possibility that the Company will be required to pay the specified amount related to suchany covenant breach is remote.

Effective on December 21, 2021, the Company entered into a Contribution and Indemnity Agreement ("Indemnity Agreement") with affiliates of Doran Companies ("Doran") in connection with the debt refinancing on the Doran Canterbury I, LLC joint venture. Under the Indemnity Agreement, the Company is obligated to indemnify Doran for loan payment amounts up to $5,000,000 only if the lender demands the loan guarantee by Doran.

The Company is periodically involved in various claims and legal actions arising in the normal course of business. Management believes that the resolution of any pending claims and legal actions at September 30, 2017March 31, 2022 and as of the date of this report, will not have a material impact on the Company’s consolidated financial positions or results of operations.

In August 2018, the Company entered into a Contract for Private Redevelopment with the City of Shakopee in connection with a Tax Increment Financing District (“TIF District”). On January 25, 2022, the Company received the fully executed First Amendment to the Contract for Redevelopment among the Master Developer, the City and the Authority, which is effective as of September 7, 2021. Under this contract, the Company is obligated to construct certain infrastructure improvements within the TIF District, and will be reimbursed for the cost of TIF eligible improvements by the City of Shakopee by future tax increment revenue generated from the developed property, up to specified maximum amounts. The total amount of funding that Canterbury will be paid as reimbursement under the TIF program for these improvements is not guaranteed and will depend on future tax revenues generated from the developed property. 

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7.    COOPERATIVE MARKETING AGREEMENT

As discussed above in Note 7,6, on June March 4,2012, the Company entered into the CMA with the SMSC. The primary purpose of the CMA is to increase purses paid during live horse racing at Canterbury Park’s Racetrack in order to strengthen Minnesota’s thoroughbred and quarter horse industry. Under the CMA, as amended, this is achieved through “Purse Enhancement Payments to Horsemen” paid directly to the MHBPA. SuchThese payments have no direct impact on the Company’s consolidated financial statements or operations.

Under the terms of the CMA, as amended, the SMSC paid the horsemen $7.2 million and $6.7 million in the first nine months of 2017 and 2016, respectively, primarily for purse enhancements for the live race meets in the respective years.

Under the CMA, as amended, SMSC also agreed to make “Marketing Payments” to the Company relating to joint marketing efforts for the mutual benefit of the Company and SMSC, including signage, joint promotions, player benefits, and events. Under the CMA, the SMSC paid the Company $1,581,000 and $1,197,000 for marketing purposes during the nine months ended September 30, 2017 and 2016, respectively.

In each of January 2015, 2016,As noted above and 2017affirmed in the CMA was amended to adjust the payment amounts between the “Purse Enhancement Payments to Horsemen” and “Marketing Payments to Canterbury Park.”Fifth Amendment, SMSC is currently obligated to make the followingan annual purse enhancement of $7,380,000 and annual marketing paymentspayment of $1,620,000 for 2018 through 2022:2022.

The amounts earned from the marketing payments are recorded as a component of other revenue and the related expenses are recorded as a component of advertising and marketing expense and depreciation in the Company’s condensed consolidated statements of operations. For the three and nine months ended September 30, 2017, March 31, 2022, the Company recorded $672,000 and $1,298,000$112,000 in other revenue, and incurred $569,000 and $1,128,000$65,000 in advertising and marketing expense, and $57,000 and $170,000incurred $47,000 in depreciation related to the SMSC marketing payment.funds. For the three and nine months ended September 30, 2016, March 31, 2021, the Company recorded $366,000 and $610,000$47,000 in other revenue, and incurred $312,000 and $440,000$23,000 in advertising and marketing expense, and $57,000 and $170,000incurred $24,000 in depreciation related to the SMSC marketing payment. The excess of amounts received over revenue is reflected as deferred revenue which is included on the consolidated balance sheets.funds.

Under the CMA, the Company agreed for the term of the CMA, which is currently scheduled to terminate on December 31,2022, that it would not promote or lobby the Minnesota legislature for expanded gambling authority and will support the SMSC’s lobbying efforts against expanding gambling authority.

8.  REAL ESTATE DEVELOPMENT

Equity Investments

Doran Canterbury I, LLC 

On April 2, 2018, the Company’s subsidiary Canterbury Development LLC, entered into an Operating Agreement (“Operating Agreement”) with an affiliate of Doran Companies (“Doran”), a national commercial and residential real estate developer, as the two members of a Minnesota limited liability company named Doran Canterbury I, LLC (“Doran Canterbury I”). Doran Canterbury I was formed as part of a joint venture between Doran and Canterbury Development LLC to construct an upscale apartment complex on land adjacent to the Company’s Racetrack (the “Project”). Doran Canterbury I has completed developing Phase I of the Project, which includes 321 units, a heated parking ramp, and a clubhouse.

On September 27, 2018, Canterbury Development LLC contributed approximately 13 acres of land as its equity contribution in the Doran Canterbury I joint venture and became a 27.4% equity member. On December 20, 2018, financing for Doran Canterbury I was secured. As the Company is able to assert significant influence, but not control, over Doran Canterbury I’s operational and financial policies, the Company accounts for the joint venture as an equity method investment. For the three months ended March 31, 2022 and 2021, the Company recorded $515,000 and $647,000, respectively, in loss on equity method investments. In accordance with U.S. GAAP, since we are committed to provide future capital contributions to Doran Canterbury I, we also present as a liability in the accompanying Condensed Consolidated Balance Sheets the net balance recorded for our share of Doran Canterbury I's losses in excess of the amount funded into Doran Canterbury I, which was $1,720,000 and $1,205,000 at March 31, 2022 and December 31, 2021, respectively.